Obama’s health-law fix sends insurers, officials scrambling

State regulators across the country said they were blindsided by President Obama’s decision to change a key health-law provision and spent Friday scrambling to make sense of it. Some said they were unsure whether their state laws would allow them to do what the president suggested.

A day after Obama tried to quell anxiety over millions of canceled insurance policies, only a handful of state regulators said they would adopt the president’s fix. Many others said they needed more time to decide what to do because of the complex logistics and far-reaching impact on consumers.

The muddle marked the latest complication for Obama’s effort to salvage his signature health law. Since its passage in 2010, the law has met with strong political opposition, and the launch of the new federal insurance marketplace over the past six weeks has been plagued by technical problems.

The president tried to solve a separate issue — his broken promise that people who like their health plans can keep them — by allowing insurance companies to extend health plans that were supposed to be banned.

But the move is adding to the confusion that surrounds the health-care law and throwing an element of uncertainty into the insurance market. The issue is making some Democrats nervous, particularly those facing tough reelection campaigns next year.

In the House on Friday, lawmakers approved a Republican bill that goes further than Obama’s administrative remedy. While the president called on insurers to give people the option of extending current policies through 2014, the House bill would allow them to continue selling to new customers policies that don’t meet the law’s consumer requirements.

Thirty-nine Democrats backed the Republican bill, representing their largest defection by far on a major or closely watched piece of legislation this year. It faces an uphill climb in the Senate, and Obama has said he would veto it.

Nervous about the potential defections, Democratic leaders deployed several senior aides on the Hill. In the hours before the vote, the aides spoke with, among others, Reps. Brad Schneider (Ill.) and Daniel Maffei (N.Y.), who won tight races last year. But both ended up voting in favor of the legislation.

Even Rep. Matthew Cartwright (Pa.), a passionate defender of the Affordable Care Act, suggested Friday that the Obama administration waited too long to address administrative fixes to the law and put too many Democrats at political risk.

The White House “knew very well that they had to give us something different to support, because simply stonewalling about the president’s promise and why it wasn’t kept was not going to be an option,” he said. Like others in his party, he concluded that Obama’s remedy “has given us something else to get behind.”

Obama and senior White House officials met with more than a dozen insurance executives Friday afternoon. According to an industry official, Obama did not have a specific “ask” for the executives, who reiterated their concerns that young, healthy people might renew canceled policies, leaving sicker and older people on the marketplaces.

The executives noted that they could not act on Obama’s remedy for cancellations without the blessing of state regulators. They discussed the possibility of insurers doing more to directly enroll individuals instead of having them use the troubled federal Web site, but no decision was made.

White House officials have met twice before with insurance executives since the Oct. 1 launch of HealthCare.gov to discuss its problematic rollout. The administration consulted with some insurance companies on the president’s proposed fix before he announced it.

Meanwhile, state regulators were left to grapple with the proposal, which they learned about Thursday. One reason for states’ uncertainty about whether they can proceed is that they are unaccustomed to regulating around executive orders, which may not be treated with the force of law.

“It’s unique, and I’m not aware of a precedent for it,” said James J. Donelon, president of the National Association of Insurance Commissioners (NAIC), who is also Louisiana's insurance commissioner. “I have seen one state attorney general already opine that a state regulator cannot act based on executive order.”

A handful of states quickly announced their decisions, splitting over whether they would let insurers issue noncompliant policies next year. Three states — Rhode Island, Vermont and Washington — will not allow any changes in their insurance markets. Five states — Florida, North Carolina, Ohio, Kentucky and Texas — will give insurers the opportunity to sell these plans.

“I’m calling on our health insurers to take advantage of this opportunity, and I’ve directed my staff to do what is necessary to make sure that insurers can allow their policyholders to keep their plan for another year,” said North Carolina Insurance Commissioner Wayne Goodwin.

Other states, including Maryland and Virginia, as well as the District of Columbia, said they need more time to decide.

District Insurance Commissioner William P. White hinted strongly late Thursday that he was opposed to the idea, saying the president’s action “undercuts the purpose of the exchanges” by creating exceptions that make it “more difficult for them to operate.”

State officials in Georgia said they lack the statutory authority to allow insurers to provide the stopgap measure.

Some regulators are frustrated by the lack of warning about the change. Insurance commissioners huddled on three separate conference calls Thursday, the first one minutes before the president’s appearance.

Montana’s insurance commissioner was in a coffee shop when she saw a television news report that Obama was going to speak. “I headed into the office and found out there was an emergency call scheduled,” said Monica Lindeen, who is also vice president of the NAIC.

She said the president’s move “throws everything on its head” after three years of preparing for the law.

“The prevailing winds change one day to the next,” said Michael F. Consedine, Pennsylvania’s insurance commissioner, who also is an executive with the professional association.

Lindeen and Consedine said they were consulting with insurance companies but know there is not much time. Dec. 15 is the deadline to purchase a plan on the new insurance exchange for coverage beginning in 2014.

In Montana, the main insurer, BlueCross BlueShield, is canceling individual policies by the end of the year. Reversing those cancellations would mean the insurer would have to develop new prices for those same plans, file them with regulators, and give consumers 45 days’ notice, Lindeen said.

Washington state’s insurance commissioner, Mike Kreidler, quickly decided Thursday that he would not allow insurers to renew noncompliant plans as the president has asked.

“It’s too late in the game, certainly for the state of Washington,” he said. “And health carriers in our state were not very excited about the prospect of this. How do you have one set of rules for one plan and another set for the others?”

State regulators are attempting to pull off a balancing act, weighing consumers’ demands to keep their plans against the pitfalls of making a last-minute change to the insurance market.

“Anytime there’s a change, they’re worried about disruptions to their marketplace,” Sarah Lueck, a consumer representative to the NAIC, said. “They’re also worried about the impact on consumers and what their options are given this is such a short time frame.”

Obama said insurance companies could continue for another year to offer health plans sold to individuals and small businesses that do not meet requirements under the new law, which set minimum standards for the benefits that policies must cover.

Individual policies have long been a problematic part of the insurance market, with higher prices than most group plans, fewer benefits and a tendency to cut people off when they get sick. The health-care law tried to address this problem by directing Americans who buy individual policies to sign up for coverage through the new insurance marketplaces and by defining a core set of essential benefits, including maternity and prescription drug coverage.

Some insurers said the confusion over canceled plans will discourage participation from a key group that insurers need for the new exchanges to succeed: young, healthy people who use little medical care.

“It is impossible to reverse what has already transpired,” said Allan Einboden, chief executive of the Scott & White Health Plan, a Texas-based insurer that covers about 200,000 people. If there aren’t enough young and healthy people in the exchanges, rates will go up, making it harder to attract them going forward, he said.

But others, like BlueCross BlueShield of North Carolina, have embraced the new option. The insurer announced Friday that it would file plans with its insurance regulator that would allow consumers to stay in their plan for an additional year.

“There are still important details to work through,” said the plan’s chief executive, Brad Wilson. “We expect to be able to provide more details about customers’ renewal options on or around December 1.”